United States retail sales edge higher in September

Consumers may have saved on lower fuel costs in September, but they pocketed the money instead of spending it.

Sales at auto dealerships increased 1.7 percent after rising 0.4 percent in August.

Seven categories showed a decline in September.

Retail sales are a sign of the strength of consumer spending, which drives about two-thirds of the USA economy’s activity. The Federal Reserve cited weakness in the global economy when it decided last month to delay a long-anticipated increase in short-term interest rates, which it has kept near zero since December 2008. Americans are buying new cars and trucks at the highest pace in a decade, but they are also saving more compared to back then. Even when volatile food and energy prices are excluded, it still showed a 0.3% drop. The drop was the biggest since January.

Meanwhile, a separate report from the U.S. Labor Department indicates inflation is not a threat that needs to play into the Fed’s decision, at least at the wholesale level. Sales at dining establishments have climbed 8.2 per cent this year.

Business inventories in the USA came in almost flat for the second straight month in August, the Commerce Department revealed in a report on Wednesday.

The September retail sales report hinted at lukewarm demand, with spending unchanged for the month once autos and gasoline sales are excluded.

Data for September showed hiring has eased.

The slowdown in retail purchases over the past few months raises questions about whether Americans have grown more anxious after stocks in the USA and around the world fell sharply.

Sales at motor vehicles and parts dealers grew 1.7% on the month, in line with the 18.1mn of light weight vehicle sales already reported. Bloomberg economists had expected a decline of just 0.1%. Sales fell at Internet retailers, general stores, home centers, groceries and outlets that sell appliances and electronics.

“Participants noted that ongoing gains in employment and real income were providing support for the rise in spending, and this support was expected to continue going forward”, according to minutes of the central bank’s September meeting released on October. 8. Clothing store sales were up 0.9 percent in September, while receipts at building materials and garden equipment stores were down 0.3 percent. “Strong auto sales have already been reported, and we project a continuation of decent sales ex autos and gasoline. iPhone sales began in late September and probably contributed very slightly ( 0.1 pct pt) to sales”.